ACIT Vs Haryana Power Generation Corporation Limited (ITAT Chandigarh)
ITAT Holds Fly Ash Sale Receipts Taxable as Accounting Treatment Cannot Override Tax Law; Fly Ash Fund Not a Shield Against Tax Because No Diversion of Income at Source; ITAT Restores ₹38.68 Crore Addition Because Accounting Treatment Cannot Override Tax Law; Sale of Fly Ash Held Taxable Because It Was Intrinsically Linked to Power Generation Business; ITAT Rejects Liability Argument Because Assessee Retained Control Over Fly Ash Fund; Government Notification on Fly Ash Utilisation Does Not Exempt Receipts From Tax; ITAT Restores Addition Because Application of Income Does Not Affect Taxability; Fly Ash Sale Proceeds Held Business Income Despite Credit to Statutory Fund.
The Income Tax Appellate Tribunal Chandigarh allowed the Revenue’s appeals and restored additions made by the Assessing Officer on account of receipts from sale of fly ash for Assessment Years 2014-15 and 2018-19. The dispute concerned whether receipts generated from sale of fly ash by a government power generation company constituted taxable business income or were merely amounts credited to a statutory fund in the nature of liability.
The assessee, engaged in the business of electricity generation, had filed its return declaring nil income, which was later revised to declare a loss. The assessment was originally completed under Section 143(3) of the Income Tax Act. Subsequently, the assessment was reopened under Section 147 on the ground that income had escaped assessment because receipts from sale of fly ash had not been offered to tax. Instead, the assessee had directly credited the amounts to a “Fly Ash Fund” in the balance sheet without routing them through the Profit and Loss Account.
